TMI Blog2012 (12) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, it still has to be excluded from export turnover. Appeal decides in favour of revenue & remand back to AO Exclusion of expense from total turnover calculated in relation to Sec. 10B – Held that:- The items which were excluded by the AO from export turnover by relying on clause (iii) of Explanation 2 to Sec 10B, will have to be excluded from total turnover also for the purpose of computing deduction u/s 10B. Issue decides in favour of assessee & remand back to AO - I.T.A. Nos. 1871, 1872& 1873/Mds/2011, C.O. Nos. 67, 68 & 69/Mds/2012 - - - Dated:- 19-7-2012 - SHRI ABRAHAM P. GEORGE AND SHRI V. DURGA RAO, JJ. Revenue by : ShriShaji P. Jacob, Addl. CIT Assessee by : ShriSriramSeshadri, CA ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : These are appeals and cross-objections of the Revenue and assessee for assessment years 2005-06, 2006-07 and 2007-08. Cross-objections filed by the assessee are delayed by 117 days. Condonation petitions have been filed albeit for 116 days. No serious objection was raised by the Revenue against condoning the delay. Reasons shown by the assessee are justifiable. Hence we condone the delay and admit the cross-obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Zylog Systems Ltd v ITO [2011] 7 ITR (Trib) 348. As per the assessee, technical services may be advice given to third party and in this case, neither was it giving advice to third parties nor it had incurred any expenditure of the like. Argument of the assessee, was that it had not rendered any technical or consultancy services which could be considered as technical services as defined in Explanation(2) to under clause (vii) of Section 9(1) of the Act. Assessee also relied on Notification No.S.O.890(E) dated 26th September, 2000 for arguing that assessee s business fell within the definition of computer software . According to assessee, in the case of Zylog Systems Ltd. (supra), the question raised was whether expenses incurred in foreign currency in computer software development of the clients placed outside India were to be excluded from export turnover or not. This issue was decided in favour of the assessee, since technical services, in that case was not rendered to any third party. As per the assessee here also, it had not rendered any technical services to any third party and hence, such amounts could not be excluded from export turnover, here also. CIT(Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Special Bench which now was in favour of assessee. According to him, Ms. Anita Madhavan was an agent of the assessee. Learned A.R. further pointed out that the coordinate Bench of this Tribunal while ruling against the assessee for the earlier years, had relied on a decision of Infosys Technologies Limited v. JCIT (109 TTJ 631). Nevertheless, according to him this decision was also considered by the Special Bench while expressing its view, in the case of Zylog Systems Ltd. (supra). Substance of decision in Zylog Systems Ltd. (supra) was that a person could not render service to himself. Assessee here had not rendered any service to any foreign person. Further, according to him, assessee in the invoices raised to the clients had not made any specific claim for technical service charges nor for reimbursement of any expenses incurred. Reliance was placed on paper-book Volume I pages 21-22 which, according to him, was representative of the invoices raised by the assessee on its clients. Learned A.R. further pointed out that Explanation 2 to Section 10B of the Act in its clause (iii) directed exclusion from export turnover only those types of expenses which were billed on the clients ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y technical service, and therefore, exclusion of such expenses from export turnover was not required. According to him, decision of this Tribunal in assessee's own case, for earlier years, could not be followed due to subsequent decision in the case of Zylog Systems Ltd. (supra) by Special Bench. We are unable to accept any of these lines of reasoning. First and foremost is that a clear finding has been given by this Tribunal in assessee's own case for earlier years, relating to foreign currency expenses of similar nature. It was clearly held that what assessee was rendering was only technical services. Relevant para 6 of the order dated 8.2.2008 of this Tribunal is reproduced hereunder:- 6. We have heard both the parties and perused the materials on record. The contention of the assessee is that Ms. Aneetha Madhavan is rendering only marketing services and is not doing any technical service. We have gone through the facts of the case. The assessee has made payments towards job work to agencies for carrying copy editing and indexing relating to e-publishing. As pointed out by Learned D.R., only a person having technical expertise and knowledge can render these services. A mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation 2 to Section 10B of the Act, runs as under:- (iii) export turnover means the consideration in respect of export [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. 9. Expenses of the nature incurred by the assessee clearly fell within the purview of the above explanation, since admittedly these were related to technical services rendered outside India. Only question is whether the decision of Special Bench in Zylog Systems Ltd. (supra) would make any difference. As pointed out by the learned D.R., in the case of Zylog Systems Ltd. (supra), the question was whether the expenses incurred in foreign currency on computer software development onsite at the client s place outside India was to be excluded from export turnover. Argument of the assessee in that case was that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also not a case of the assessee that such expenses were not considered by it as a part of its revenue outgo. Once expenses of the nature mentioned in clause (iii) of Explanation 2 to section 10B of the Act are incurred, these will have to be excluded from export turnover, whether or not billings of the assessee specifically mentioned such items. Even if such expenses other than on technical services, are incurred in India, it still has to be excluded from export turnover as held by Special Bench in the case of ITO Vs. Sak Soft Ltd. (2009) 313 ITR (A.T) 353. We are thus of the opinion that CIT(Appeals) fell in error, when he directed the A.O. to exclude foreign currency expenses from the export turnover, while working out the deduction u/s.10B of the Act. 11. In the result, we set aside the orders of CIT(Appeals) and reinstate computation made by the Assessing Officer in working out reduction under Section 10B of the Act, subject to our finding on the cross objections of the assessee. 12. Assessee in its cross-objections has raised the issue of nonexclusion of such amounts from total turnover also. Admittedly, such a ground was raised before the CIT(Appeals) who had not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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